Hedging May Have Increased Cost for Alagasco Customers

A member of the Public Service Commission says hedging agreements on natural gas prices have added nearly $245 million to the bills of Alabama Gas Corp. customers, since the state's largest natural gas distributor started the practice in 2003.

A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment.

PSC member Terry Dunn said Alabama Gas is one of many utilities that used the risk-management strategy and saw it "go very badly in recent years." He said it points to the need for the PSC to re-examine its rules on hedging agreements.

Alabama Gas spokeswoman Sherri Goodman said the PSC changed its rules in 2000 to allow hedging. She said the company has not signed any new hedging agreements since 2010 and it sees no need for any in the near future. Its last agreements end in March.

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